From the very first line author draws a reader's attention to the place where the main characters live and where the story develops. It is a very cheap and poor flat. The story probably takes place in New York, early 1900's ("For there lay The Combs - the set of combs, side and back, that Della had worshipped long in a Broadway window." - author mentions Broadway Street which is in New York; "She got out her curling irons and lighted the gas" - probably early 20th century). O. Henry depicts the flat giving enough details to create an image of its poverty: it's cheap ("A furnished flat at $8 per week"), barely furnished, and has a broken mailbox and a broken doorbell ("In the vestibule below was a letter-box into which no letter would go, and an electric button from which no mortal finger could coax a ring".) It's apparently one of the destitute districts in the city (the flat has a backyard, which is a little less urban).The atmosphere rather dull and depressing ("She stood by the window and looked out dully at a gray cat walking a gray fence in a gray backyard"), thought it is Christmas Eve, but, nevertheless, it shows us the contrast between the real outside world and feelings and emotions which live in the hearts of Jim and Della. Though they live in reduced circumstances, a reader can see that they are happy, because they have each other, Della and Jim are family. And their tiny and miserable flat seems peaceful and homely.